Readers' comments

I find the protests in Athens to be more against the Politicians than austerity itself. The problem is that the same people that squandered the money they borrowed post entry to the Euro, are still in power. A new generation of politicians need to step up, when/if they do there will be much more division as to how to deal with this crisis. And it is very much a crisis.

Allowing a bank or two to default might not be the end, but a significant enough portion did, it would lead to complete economic caos, not a good thing at all, that is why there are bailouts.

The euro isn't really the problem per se, but that Greece joined it in the first place. They never should have. I was shocked when they did. I had seen the numbers and knew it did not add up. (And I was just a kid at the time. I went on to study EU and Euro business)

When Greece joined the Euro their government gained access to cheap money, which they promptly squandered. Some governments seem to think that as long as you spend you can get sustainable growth like China. You can't, just because you build the infrastructure or just pump the economy full of money, does not mean the money is well spent.

The way to compare this to Britian (though it is hard to compare as the UK is not in the Euro) is to imagine still having Labour in power, with no potential for getting rid of them any time soon with a Greece like economy. The British people would not stand for it.

With a lot less economical problems they did not, Labour lost its power. Though I suspect they will rebound as the Coalision tries to get the economy back on track, and austerity is felt. People tend not to think long term enough.

Why people are so desperately trying to prop up our unsustainable financial-economic system is totally beyond me. We must get rid of the part of our prosperity that was bought with borrowed money and thus is artificial. You can only keep that part (I estimate 10-15%) of our prosperity up with ever increasing borrowing. Better to take a bit of pain now, than a whole lot next year.

Issues at hand: let failed corporations and banks fail, new ones will come in and this will be better in the long run plus help keep them honest if they know 'no bailout no matter what'. Also, abolish the Euro and political integration (no popular support exists for political integration) and revert back to the amiable economic cooperation in an European Economic Community. Make it clear that financial markets are our servants, not our masters, so they will stop lending money to countries with bad credit or which are effectively insolvent.

The current level of prosperity cannot be perpetually propped up for the same number of people indefinately, let alone for an increasing number of people or even the whole planet. Totally impossible. Unless you like mass debt slavery, I guess.

And strip the bankers of their ill gotten gains, put Goldman Sachs on trial and arrest its board of directors. Remember, Goldman Sachs helped Greece cook the books for Euro entry and is now reaping billions in profits because of that. Goldman Sachs like the IMF is in my view a criminal organization.

Here's a radical idea. How about defaulting and NOT recapitalizing the banks? Failed corporations with failed business models (they're in trouble now even with no default) should not be propped up. These banker bailouts we've seen in the 'west' over the last years may seem to some to have been beneficial, but in fact have been quite destructive. New banks will come in, and will have seen the lesson of 'you will not get bailed out if you fail'. This, better than anything else, will keep them honest. Because 'guaranteed bailouts if you fail' will only result in them taking ever bigger risks.

The 'big banks', deemed 'too big to fail' (which was corporate scaremongering propaganda) were bailed out, which meant they got even bigger than before and smaller, often local competitors were forced out of the markets because they cannot compete with large corporations backed by government guarantees (that no taxpayer ever agreed to, FWIW).

Banks and investors should have checked countries prospects, outlook, outstanding debt etc... before they started lending these countries billions which were used to buy votes and prop up welfare states. Lender beware should have been the motto, but instead they went crazy and gave new governments money again and again and again, ignoring the pileups of national debts. Those who lend money so recklessly, should not expect to get away without losing a dime, while taxpayers have to foot the bill. These bailouts are the largest poor-to-rich wealth transfers of all time, the largest heist of all time, and they seem to be getting away with it.

I call on the Greek people to revolt, overthrow the slave-to-IMF-government, default on the entire debt and recover within a few years. Just ignore the pro-banker pro-corporate scaremongers and draculean investors who will cry foul and threaten apocalypse, recent history shows that after most defaults, countries are decidedly better off in recotd time. Just ask Argentina, who finally shed the destructive IMF-imposed 'sell-off' scheme, and defaulted and got better off within 3 years.

you are well informed about those issues, if you don't mind me saying many of you are obsessed by the past, ottoman empire and turkey. i think it is wrong you are always very negative about our relationship. this is why you fail in economy because you waste your energy with trivial things. things which have no relevance today. how is it going to help you to know that istanbul was once greek?

when it comes to the GDP figures. they are an absolute joke. you produce nothing but tomatoes and that is only for your consumption. your GDP is in reality 5000 euro per year, your pensioner should get 300 euro per month and not 2000 euro per month. if your government pays that amount this is where you end up, bankrupt.

you are our neighbour and i am sorry to see you struggling like this. don't forget we were in the same position a few years ago. the best thing is for the greek people is to stop demonstrating and getting down to work and produce things that other countries want. and also take part in regional development that means trade with turkey and the other balkan states. come down from your high horse ( we are europeans etc. etc.) and work and sweat for your living same as everybody else. and good luck.

Greece isn't the only country that suggests Turkey isn't ready (see Austria for the loudest opponent actually). Heck many think Greece isn't ready for the EU (and Greece in the middle of an economic meltdown has twice the GDP/capita of Turkey)

2. declaring that every greek island in the eagean sea have a 200 mile no entry zone thus turning the eagean sea to be a no go area for turkey

Why is the Turkish government flying over Greek Islands to begin with? Is there some sort of war going on between our two countries? I think decent Turks understand such behavior is provocative. What if it was Greek fighter jets flying over Istanbul? That wouldn't upset you?

3. making sure that the turkish part of cyprus has no international standing so that they beg you to be integrated into the greek cyprus

Perhaps if Ottomans hadn't entirely erased a 1000 year Greek Roman state.... the Turkish government hadn't used their military to evade Cyprus... Turkey wasn't flying over our airspace... and Turkish nationalists like you weren't using articles on our debt to ethnically harass us.... maybe we wouldn't be so paranoid.

4. declare that the ottoman turks killed many greeks thus amounting to genocide.

The Ottoman Turks did kill many Greeks (as well as many Armenians). The entire city of what is today is called "Istanbul" used to be part of the Byzantine state (as well as much of Asia Minor Greek). Whether that is "genocide " is up to historians of the world to decide. The Turkish government likes to complain about Israel's nation building for their fellow Muslim Palestinians. They don't think twice what they did to Greeks.

5. Declare that macedonians can not call their country macedonia because there is an area of greece called macedonia, if they insist on that make sure that they can not enter the EU as a member state.

Perhaps if people like you stop pretending you didn't notice the former self-identifying ethnic Bulgarians of the former Yugoslavia's attempts to usurp our history and territory we could take your claims more seriously. As it stands people like you I sincerely interpret as out to ethnic cleanse Macedonians (aka the Greeks whose very identity you generously hand over to a neighboring state)

Our debt is our own fault. Its shameful and I'm truly embarrassed by it. All the other issues you attempt to demonize us over is evidence we unfortunately also have to worry about other matters too. (in particular our ethnic cleansing)

@The Economist: Finally a chink in the Economist's armour. It seems they have softened their stance after such a long time of claiming that default is the only option-without any discussion of the consequences. This is the first accurate analysis of the Greek debt crisis the economist has offered. I am glad to see that they too can appreciate it is not black and white.

@Robert North: There are two accounts that banks hold bonds in. 1 Trading book: this is marked to market. 2. Hold till maturity: As the name suggests, these holdings are held to maturity, so when the market value goes up and down, it does not affect the "face value" or redemption value of the bond. This has nothing to do with being European or not, get off your Anglo-Saxon horse! If you are suggesting that the Hold to maturity account should also be adjusted for credit risk, you are probably right but I didn't get that message from what you wrote.

The Great Deleveraging will be painful for Greece and Europe and the USA and Japan.

Greece has state assets that are worth ZERO. Unions with platinum plated contracts at high wages and benefits means the assets are worthless. Lack of land title facilities means government property is worth ZERO. Greeks are rioting to not suffer reasonable wage and benefit reductions. Greek government bonds now yield over 30% for two years. Greece cannot borrow any funds to pay currently maturing bonds. German and other taxpayers are fed up funding Greeks' lavish lifestyle.

The ONLY reasonable conclusion is Greek default and exit from the Euro. The question is WHEN, not if. Greece has defaulted before, many times. Europe should have paid attention to their history. Keep ignoring history and you are bound to repeat it.

The article begs the following question: If Greek Banks were saddled by their Government with its toxic waste, why did they not sound the alarm bells before hand? Surely someone within the boards of directors of these banks should have calculated their exposure to these junk bonds and advised their government that the accumulated debts of the Greek state are creating the conditions for a very serious financial crisis. It appears that common sense is either non-existent in Greece or in very short supply indeed.

1. stopping turkey progressing with the EU entrance requirements
2. declaring that every greek island in the eagean sea have a 200 mile no entry zone thus turning the eagean sea to be a no go area for turkey
3. making sure that the turkish part of cyprus has no international standing so that they beg you to be integrated into the greek cyprus
4. declare that the ottoman turks killed many greeks thus amounting to genocide.
5. declare that macedonians can not call their country macedonia because there is an area of greece called macedonia, if they insist on that make sure that they can not enter the EU as a member state.

well it looks like greeks have a lot to do before they worry about the debt problem. let it all hang out. life is a minestrone.

Any solution that does not include a devaluation (ie leaving the Euro)will not do the trick. Unless the Greek economy starts to grow, there is no hope, and the only way to make that happen is devaluation.

Selling assets at the bottom of the market, while massive uncertainty reins is foolish, and that uncertainty will continue until a real solution is found.

You say; "But there would probably be only a limited impact on capital because accounting rules give banks wide latitude in calculating the net present value of the bonds, enabling them to reduce the hit they would take to capital."

This may be correct if the equity value of their capital is not adjusted for 'realtime' or end of year equity prices (the banks that is, I guess being European not required) but it ultimately has no effect on mkt value/cap since the mkt will take their own view re; Discount rate used (in terms of adequacy).

Rating agencies take turns to lower the outlook/downgrade European Banks.

For my mind that is “contagion”.

Noises from the Troika leave a lot of room for misinterpretation of what they intend to do; even if a cynical mind assumes that the Schaeuble stand-off on “voluntary” participation is mainly addressed to the seething national audience, and will fall apart……

Add the ECB exposure to European Bonds (estimated around EUR 500bn), the Target 2 exposure, another EUR 400bn per Dec 2010

(Please carefully read attached article, (especially the 4th last paragraph from the end)) According to that paragraph, Target 2 funding for Ireland replaces private borrowings from German and French Banks)http://www.voxeu.org/index.php?q=node/6625

The EURO worked as long as the markets assumed that the European Community backs up its members (i.e. Germany pays in the end). If that guarantee is explicitly withdrawn, the market will price non German Euro Bonds (and everything else) based on their “real credit” risk. Tomorrow.